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HGP Health IT November Insights

December 10, 2018

HGP is pleased to introduce its Health IT Monthly Insights report, which includes a summary of transaction and news highlights in the sector. The month of November saw non-healthcare enterprise software companies, such as Amazon and Google, continuing to build their infrastructure for expansion in the healthcare market, while health IT incumbents, particularly publicly-traded vendors focused on the EMR market, posted disappointing results. The transaction activity for the month underscores the dynamic nature of the market, with significant and visionary transactions cutting across the provider, patient, and life sciences markets.

Noteworthy Transactions

ResMed announced the acquisition of MatrixCare, developer of a cloud-based long-term post-acute care software intended to leverage technology to improve quality of life for seniors. According to the announcement, the $750mm acquisition implies a 6.15x 2018E revenue and 25x pro-forma 2018E EBITDA multiple. MatrixCare was previously owned by OMERS Private Equity.

GetWellNetwork announced the acquisition of HealthLoop. Deal terms were not disclosed, but HealthLoop previously raised $24mm from a consortium of investors, including Summation Health Ventures. HealthLoop’s platform engages patients at home before their admission and after discharge to continuously guide, educate and assess the status of their recovery, enabling medical institutions to improve care co-ordination.

WuXi NextCODE raised another $200mm, increasing total funding to over $440mm. China-based WuXi NextCODE operates as a subsidiary of WuXi PharmaTech and provides big data analytics for genome sequencing and personalized medicine. The investor in the latest round was Temasek Holdings, a Singapore-based SWF.

Q-Centrix was recapitalized by TPG Capital. Q-Centrix offers data management applications for hospital and healthcare providers, intended to improve their safety and quality through comprehensive management of data at a reduced cost. Sterling Partners was the seller.

Noteworthy News Headlines

Amazon announced it will launch a software product for payers that combs through electronic patient records to find incorrect coding or diagnoses in an effort to improve quality and lower cost.

CVS Health wrapped up its $70 billion acquisition of Aetna, promising to include digital health tools in its “new innovative healthcare model.”

Allscripts rebranded its Payer & Life Sciences Division to Veradigm, offering clinical workflow, research, and analytics software and services to providers, payers, and health IT and life sciences companies.

Alphabet announced it will move its London-based DeepMind healthcare AI subsidiary under the newly formed Google Health, which will be led by former Geisinger CEO David Feinberg.

Allscripts and NextGen Healthcare turn in disappointing quarterly results that sent shares sharply down, and Allscripts said in its earnings call that it will launch a formal sales process for its stake in Netsmart.

A ProPublica investigative article questioned the VA’s selection of Cerner, its management of the implementation, its choice of questionably experienced project leadership, and the gap between the original lofty goals and the reality of what Cerner is delivering.

Public Company Performance

HGP tracks stock indices for publicly traded health IT companies within four different sectors - Health IT, Payers, Healthcare Services, and Health IT & Payer Services. The chart below summarizes the performance of these sectors compared to the S&P 500 for the month of November:

The following tables include summary statistics on the four sectors tracked by HGP as well as the S&P 500 and Nasdaq for November 2018: